How Anzco Foods bucked the trend to turn in a profit for 2023

Anzco defied the trend to report a profit in the 2023 year.

Meat processor and exporter Anzco Foods has defied the meat sector trend by reporting a profit for 2023, despite the dual challenge of higher costs and a slow recovery in China.

Christchurch-based Anzco, one of New Zealand’s biggest meat exporters, is involved in the farming, processing, manufacturing and marketing of New Zealand beef and lamb products to the world.

The company, which is wholly owned by Japan’s Itoham Yonekyu Holdings, said its net profit fell 58.4 per cent to $44.4 million from the previous year’s bumper profit of $106.6m.

Turnover edged down to $1.83 billion from $1.90b.

Anzco’s competitors, Alliance Group and Silver Fern Farms, have both turned in annual losses.

Chief executive Peter Conley said it was a pleasing result given the challenging business environment the sector experienced during 2023.

“There were some positive signs for exporters during the year, including the Covid recovery bringing an upswing in tourism and restaurant business. However, this was countered by the global impact of rising costs and interest rates, as well as consumers facing higher living costs,” he said.

“The recovery in China has been slower than anticipated, and this coincided with difficult trading conditions for some key products in other markets.”

Anzco, with its global reach, was able to effectively navigate market pricing challenges for beef and lamb at various stages of the season, he said.

The company undertook a “depopulation and repopulation” of its Five Star Beef operation as part of the programme to eradicate Mycoplasma bovis from New Zealand.

As an infected farm, Five Star Beef - the country’s biggest feedlot - went through the same culling process as all other infected farms did, which meant the company’s high-value niche products were out of the market for six months.

“The depopulation, cleaning and repopulation had a considerable impact on our staff, customers and suppliers working with the Five Star Beef business,” Conley said.

Chief financial officer Joe Bebbington said the company’s earnings were returning to more normal levels after a stellar year for meat in 2022, when prices were very high.

“We are pleased with our 2023 result because it has been a really tough year,” he told the Herald.

“It is still our third-best result in history,” he said.

Anzco turns 40 this year.

Two years ago, the company, recognising New Zealand’s declining stock numbers, branched out into health products such as bio-tissue, which is used in heart surgery for the repair of valves.

Anzco’s value-add food and healthcare businesses performed well and continued to grow their contribution to the company’s result during 2023.

“Our relationships with some of the world’s leading healthcare companies give us confidence that this business will continue to grow and add value to our core red meat processing business,” the company said.

Last year, Alliance turned in a loss of $70.17m against a profit of $73.6m in the previous financial year, prompting capital raise from its farmer owners.

Dunedin-based Silver Fern Farms Limited - - the country’s biggest meat exporter - posted a $24.4m loss for the 2023 financial year from a record profit in the 2022 year of $189.3m.

Data out this week from the Meat Industry Association (MIA) showed the industry continues to face weaker pricing and faltering demand in China.

New Zealand exported $2.58b worth of red meat products in the first quarter of the year, down 5 per cent on the first quarter of 2023 and the lowest value for the quarter since 2018, according to MIA analysis.

MIA chief executive Sirma Karapeeva said the weaker Chinese market was partly offset by good demand from North America and there are signs of some recovery in the United Kingdom and Japan.

However, China remained challenging, with exports down 27 per cent to $796m.

Stats NZ said last week the national sheep flock is continuing to decline, with the number of total sheep falling by 3 per cent to 24.4 million for the year ended June 2023.

In the same period, total beef cattle numbers fell by 4 per cent to 3.7 million and dairy cattle by 1 per cent to 5.9 million.

“The number of livestock has been dropping and this is linked to a long-term drop in the total area of grassland,” environmental and agricultural statistics senior manager Stuart Jones said.

From 2011 to 2023, the total area in grassland (excluding tussock) fell by 12 per cent (942,000 hectares), the total number of sheep fell by 22 per cent (6.8 million), and the total number of beef cattle fell by 5 per cent (192,000).

The area equated to about 15 Lake Taupōs, Jones said.

“Some of the land that was being used for grassland farming is now planted in forest,” he said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.